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Monday, July 8, 2013

Local Brokerages Stock Call 4 July 2013

From OCBC:

 SingTel: No Myanmar, no problem
SingTel, despite being widely touted as a front-runner, was not among the two winners of the 15-year telecommunications licences in Myanmar. But not winning it may not be a bad thing, given the massive scale of the infrastructure roll-out, and the still uncertain regulatory environment in the nascent mobile market. However, we believe that there are still opportunities for SingTel to get involved at a later stage when the industry is more settled and the regulatory environment is more established. Separately, we see the recent volatility in the regional currencies as the biggest risk factor, as SingTel is especially exposed to AUD/SGD movements because of Optus. However, we do note that some value is starting to emerge around current levels, as SingTel has fallen back to below our SOTP fair value of S$3.83. Hence we maintain our HOLD rating and would be buyers closer to S$3.50.

ST Engineering: Reducing peg from 22x to 20x
The share price of Singapore Technologies Engineering (STE) has fallen 12.1% since the peak of S$4.56 on 24 Apr 2013. But we note recent contract wins that attest to the group’s market leading positions. Just yesterday, ST Aerospace announced that it has signed a long-term agreement with UTC Aerospace Systems to provide maintenance, repair and overhaul (MRO) services on the Boeing 787 Dreamliner nacelle systems for the Rolls-Royce Trent 1000 and General Electric GEnx engines. Nevertheless, as the market seems to be taking a more “risk off” approach, we are now using a lower 20x peg (versus 22x previously) against our FY13F EPS, which results in our fair value easing from to S$3.97 from S$4.36. We maintain a HOLD rating on STE, supported by an estimated FY13 dividend yield of 4.5%.

Midas Holdings: Wins CNY44.3m metro contract
Midas Holdings (Midas) announced last evening that it has secured a CNY44.3m metro contract for the Changchun Metro Lines 1 and 2. This involves the supply of aluminium alloy extrusion profiles for 44 train sets (or 264 train cars), with delivery slated to occur from 2013 to 2015. This latest development brings total YTD contract wins by Midas to ~CNY423.2m and also illustrates the positive momentum in China’s metro industry, given the development of new metro lines and upgrading of existing systems. We are keeping our estimates intact as our projections allow for such contract wins. Maintain BUY and S$0.54 fair value estimate on Midas, based on 1.1x FY13F P/B.

From Maybank KE:
Biosensors International: More Risks To Licensing Revenue; Hold, TP$1.17
BIG SP | Mkt Cap USD1.5b | ADTV USD3.0m

We flag further risks in licensing revenue from Terumo which could cap share price recovery. Not time for re-entry, maintain Hold, SOTP-based TP trimmed to SGD1.17.
We note in Terumo’s “The New Mid-Term Plan (FY2013 – FY2016)” dated May 2013 that a new Drug Eluting Stent (DES) was introduced in its product pipelines. We suspect that this is intended to eventually replace the Nobori DES once the licensing agreement with Biosensors expires in 2016.
Biosensors has a sound business strategy to transform into a multi-product platform and we recognise the long-term potential. However, given the difficulties in quantifying the long-term potential and risks from M&As without more clarity, we have been holding back our optimism. We await value accretive M&As as potential catalysts for upgrade.

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